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Why is Repo Rate higher than Reverse Repo Rate?

By IndianMoney , 11 months ago

Repo rate is always higher than reverse repo rate because, only then RBI can charge more interest on lendings rather than paying more interest on deposits. This will increase the cash flow from RBI to commercial banks. Also if reverse repo rate is increased, then commercial banks will park their money with the RBI, leading to a liquidity crunch.

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